Will Real Estate Law Change The Face Of Property Markets
Will Real Estate Law Change The Face Of Property Markets
The Real Estate Law that came in to force on May 1, 2017 has been designed to bring increased transparency and accountability across the real estate sector that has traditionally been unorganised and fragmented. The act seeks to protect the interest of the homebuyers and also, ensure greater transactional and delivery vigilance on the part of the developers.
Sources reached out to Shubika Bilkha, Business Head, The Real Estate Management Institute- REMI, The Annet Group to understand what the industry feels about the future of real estate after the Real Estate law became a reality.
Here are some points that developers would need to focus on while homebuyers would be happy that they have been extended protection in the following ways:
Work fast during the transition and towards compliance
It is now incumbent on developers, irrespective of business segment — affordable, mid and luxury, to align their business practices with the stipulations of the Act. While managing any transitionary phase is not without its accompanying challenges, developers need to work fast to equip themselves and their teams with the requisite tools to understand the impact of the regime, structure their organisations and streamline their operating processes to ensure compliance.
No compromise on accuracy
The onus rests on the promoter to ensure 100 per cent accuracy of information in lieu of the stringent penalties. It also makes it equally important for promoters/real estate owners to train employees across their organisation — from projects to accounts to sales to marketing — of the guidelines of the law that directly impact their role/function.
Register ongoing projects to ensure continuing sales
Under the Act, developers have to register their projects with all the details by phases, submit the approved plans and meet the completion timeline of each phase to release payments from the project account and avoid penalties.
Manage project cashflow
The Act also makes cashflow management critical as it limits any collections in advance from buyers (on registered projects) and restricts withdrawals from the project account to the accomplishment of delivery milestones.
Focus on delivery
The Act ensures that developers comply with the committed project delivery timelines. Any changes to the structural plan now require a consent of two-thirds of buyers. Furthermore, the developer is now responsible for structural defects up to a period of five years from the date of possession.
Conversations and agreements with partners/joint ventures/joint developers
The role of the ‘Promoter’ under the Act now includes the joint developer or partners who have typically existed outside the realm of the regulatory framework. The arrangement that partners have with the developer will determine the extent of their liability in the project. Whether it’s a partial revenue share, outright sale or allotment of apartments as a compensation, it is important that developers and partners have a clear sense of their revenue sharing arrangements under the Act.
Build enhanced delivery capabilities
For the majority of developers, meeting the stipulations of the Act requires building enhanced delivery capabilities within their organisations by way of people, processes and technologies. Project management under RERA has now become an essential aspect of the development process. For a number of real estate companies, this means increasing the number of project managers within their organisations and taking a more structured approach towards development. It also means adopting the right project management tools and newer construction technologies to meet the timeline for completion.
Structure the arrangement with vendors/suppliers
With the Act now requiring developers to be liable for structural defects up to a period of five years from possession, it is essential that developers review their working arrangements with suppliers/vendors to ensure that there is a common lock-in period. This will enable them to share some of the liabilities with respect to structural defects and ensure quality vigilance on the part of the suppliers/vendors.
Additionally, with the advent of the GST, developers are now incentivized to work with organised vendors and suppliers to get the input tax credit.
Appoint a RERA compliance officer
Integration of various departments and teams is now important to ensure RERA compliance. Third parties such as Architects, Accountants, Surveyors now come within the framework of the Act. Companies are gearing up to appoint RERA compliance officers across departments/teams to ensure adherence.
Get customer centric
The Act has been framed in a way that it protects the interest of the consumer. Consumers have long suffered from false promises and delayed delivery of their homes. Under the Act, ‘customer centricity’ becomes everyone’s responsibility across the organisation. The communication with the customer at each stage is key to ensure compliance. Re-visiting their marketing and communication strategies, ensuring the appropriate checks and balances are in place with respect to all customer communication, making the sales/marketing departments/agencies/channel partners aware of their responsibilities under the Act and developing a culture of open communication with the customer, are some of the measures real estate companies are taking to ensure compliance.
Train teams/managers/senior leadership
Leadership needs to be trained on the guidelines of RERA and the direct impact of the rules to their roles/job functions. It is essential that the essence of the Act and the liabilities percolates down to the last person in the value chain across all real estate companies
With these, the trust deficit between the developer and home buyer is expected to be narrowed.
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